Question

Adidea Corp. estimates that $5,670 of its accounts receivables are uncollectible. How will the company record the transaction?

Answer 1

Adidea Corp. will record the uncollectible accounts receivables by reducing the accounts receivable and increasing the allowance for doubtful accounts.

Step-by-step explanation:

Adidea Corp. will record the uncollectible accounts receivables transaction by making an adjustment to its financial records. The journal entry will involve reducing the accounts receivable account and increasing the allowance for doubtful accounts (AFDA) account.

Here is an example of the journal entry:

• Debit AFDA (Allowance for Doubtful Accounts) for $5,670
• Credit Accounts Receivable for $5,670

This entry reflects the recognition of the estimated uncollectible amount as an expense and reduces the value of the accounts receivable.